Bankruptcy exit OK'd for Adelphia

January 06, 2007|By Bloomberg News

NEW YORK -- Adelphia Communications Corp.'s plan to end more than four years of bankruptcy protection and distribute $15 billion in cash and stock to creditors was officially confirmed yesterday by a judge in New York.

U.S. Bankruptcy Judge Robert E. Gerber signed a confirmation order ratifying the exit plan in one of the biggest bankruptcies in U.S. history. Gerber said Wednesday that he would confirm the plan, which is to take effect in 10 business days, barring an appeal.

"The plan is hereby confirmed," his 53-page order said.

Adelphia sought protection from creditors in 2002, a month before founder John J. Rigas, 82, was arrested in a $2.3 billion accounting fraud.

The company sold substantially all its cable operations in July 2006 to Comcast Corp. and Time Warner Inc. for cash and shares in Time Warner's cable unit. Under the plan, Adelphia will distribute the cash and shares to creditors and wind down operations.

In March 2002, the company disclosed that Rigas and his family owed billions in off-balance-sheet debt on bank loans taken jointly with the company. Soon after, Adelphia filed for bankruptcy and Rigas was arrested along with his sons Timothy J. Rigas, 50, and Michael J. Rigas, 53.

When the company filed for bankruptcy protection, it had assets of $24.4 billion and liabilities of $18.6 billion.

The Adelphia bankruptcy is the 11th biggest in U.S. history by assets, according to BankruptcyData.com, a Web site that tracks bankruptcies. WorldCom Inc., another company brought down by fraud, filed the largest bankruptcy, with more than $100 billion in assets.

The value of Adelphia's Time Warner Cable stock was a point of contention during hearings on the plan in December.

According to Gerber's decision Wednesday, the value of the Time Warner Cable stock is $6.5 billion, which falls at the high end of a range of values presented by an Adelphia expert at the hearings. The proposed plan set the value at $5.1 billion or $5.4 billion.

"A factual finding on my part that the stock is not now worth $5.1 billion or $5.4 billion is not the same as a conclusion of law that it was or would be wrong to enter into a consensual order under which the stock is assumed to be worth $5.1 billion or $5.4 billion," Gerber wrote in his decision.

In an objection filed Thursday, lawyers for the ACC Bondholder Group, which opposes the plan, argued that the proposed order didn't reflect the judge's conclusion that the Time Warner Cable stock is worth $6.5 billion. The size of the ACC Bondholder Group's recovery hinges in part on the value of the shares.

Their clients "continue to believe the plan is unconfirmable," the lawyers said. Lawyers for a committee of Adelphia shareholders also filed an objection.

Plan opponents have until Jan. 16 to appeal the confirmation order. If no appeal is filed by the deadline, the plan will become effective.

John Rigas, now 82, was convicted of fraud in 2004 and sentenced to 15 years in prison. Timothy Rigas, who had been Adelphia's finance chief, got 20 years for fraud. Both men are free pending appeal. Michael Rigas pleaded guilty to a lesser charge and avoided jail.